Book Review: Harnessing Blockchain for E-Government, Sustainability, and the Real Estate Sector
By Shalin Hai-Jew, Kansas State University
Blockchain Technology and Applications
Jan Veuger, Editor
New York: Nova Science Publishers
2019
270 pp.
What can people do with a technology initially designed to challenge the existing monetary order of fiat currencies and replace it with exchangeable values recorded on a permanent ledger that prevents double-spends of the particular monetary unit? In particular, what can society do with a validation technology proposed by an individual or group going by the pseudonymous name “Satoshi Nakamoto” (as-yet not identified credibly) in 2008 who proposed “bitcoin” as a “peer-to-peer electronic cash system” backed up by a blockchain (and disintermediating traditional financial institutions and governments in their roles backstopping fiat currencies)? How can people move past the glamor, the myth-making, and the hype (to which people are so susceptible) of the open-source technology underlying various cryptocurrencies and electronic wallets?
Blockchain is the current technology that is the target of so much (unwarranted?) attention. In the headlines, it is linked to both promise and peril. Major cloud service providers offer blockchain as one option of many services. The peril relates to lost virtual moneys—which are not backstopped by anything; the high costs of electricity to “mine” cryptocurrencies and write to the particular currency blockchain; and other aspects.
New Non-Fintech Ways to Deploy a Blockchain?
Jan Veuger’s Blockchain Technology and Applications (2019) is a collection of research works that aims to answer the above questions with practical applications of blockchain technology. If bitcoin is composed of four elements, “cryptography, a peer-to-peer network, an open source protocol and a shared ledger” (Veuger, 2019, p. vii), the blockchain piece refers mostly to the open-source protocol and shared ledger. The editor writes in the Preface that blockchain may offer “efficiency, transparency, ownership, value (transfer), automation and service provision” (Veuger, 2019, p. vii). [A record is imbued with meaning and power by people, not the underlying technology alone.]
Blockchain technologies have continued to evolve around the world. The proposed and developed (in some cases) blockchain applications riff off the original idea. The blockchain is conceptualized as an “immutable” database that is thought to be able to affect in-world mutability; it is one link in complex human endeavors enabled in part by computation. In some instantiations, there are trusted nodes that may write to the public immutable blockchain, some methods for unwinding mistakes on a permanent blockchain, the including of various entities into one related blockchain (banks, financing agencies, real estate agencies, builders, notaries, government agencies, and others, in a real estate context), and other innovations.
Agenda 2030 and International Governance
Danielle Mendes Thame Denny and Roberto Ferreira Paulo’s “Blockchain and the Agenda 2030” (Ch. 1) takes a global development approach in harnessing a distributed ledger. Agenda 2030 is “an international non-legally binding document that established a global program to engage governments, enterprises, and social society in collectively acting in enhancing the quality of life world widely” (Denny & Paulo, 2019, pp. 1 - 2), particularly social-environmentally. In the absence of a centralized authority that may ensure that countries follow through on the consensus-created UN’s Sustainable Development Goals (SDG) commitments, perhaps this global endeavor may harness blockchain as a forcing function by capturing metrics around poverty, hunger, human rights, human health, gender equality, girl and women empowerment, protection of the environment, and other goals. (Denny & Paulo, 2019) The stakeholders include those at “transnational, international, national, and subnational” levels and include “governments, international organizations, private business, academia, and civil society” working together around these goals (Denny & Paulo, 2019, p. 3). While there are some apps and websites (including a georeferenced one) to support these endeavors, “distributed ledger technology” (DLT) may be harnessed to capture relevant big data and information for mass usage and sharing (while protecting against privacy infringements and possible data mis-use) (Denny & Paulo, 2019, p. 5). Through the shared DLT databases, users may access the data and apparently make corrections (Hileman & Rauchs, 2017, p. 20, as cited in Denny & Paulo, 2019, p. 8). DLTs may enable increased “network collaboration speed and efficiency with greater transparency and reliability” (Denny & Paulo, 2019, p. 7). Consensus oversight and human auditing of the data are conceptualized as leading to more trustworthy contents (Denny & Paulo, 2019, p. 8).
While DLTs may be blockchains, not all of them are. “Permissioned” distributed ledger technology (a “hyperledger technology”) is a system built on trusted nodes, where anonymity is not a system feature, and nor is “proof of work” (like bitcoin mining). Here, encryption is not seen as a requirement per se unless heightened security is somehow required. Transactions may be traced to identifiable individuals, and audits may be conducted and revisions made (Denny & Paulo, 2019, p. 9). Given these features, the co-authors propose that blockchain may be useful to distribute and track government benefits such as that of the Bolsa Familia transactions, which contribute to the SDGs of Brazil (Denny & Paulo, 2019, p. 15).
The co-authors bring the issue back to Earth:
Important to mention that DLT is not the silver bullet for all problems, nor is it by itself a more efficient and secure database technology, it depends on the uses for which it is foreseen and the reality in which it is implemented. Where existing traditional databases work well it would be an unnecessary cost and it would be inefficient to switch to using massive computational capacity to achieve decentralized consensus in contexts where this is not required. Also if the goal is to centrally store data, protect it against intruders, and centralize control and data usage, using DLT would be less efficient. (Denny & Paulo, 2019, p. 16)
They follow with an idea of when DLTs might be useful technologically and economically: “…when agents are corrupt, (to) identify problems of delays, inefficiencies, difficulties among several involved in reaching consensus on the existence and evolution of shared data” and in cases when compliance is desirable (Denny & Paulo, 2019, p. 16). In implementation, DLTs have “problems related to the scalability, privacy, and confidentiality,” among others (Denny & Paulo, 2019, p. 18), much less blockchain implementations of DLTs. So often, the capabilities of technologies are the main focus, and human nature individually and in groups, in collaborations, do not seem to be considered.
E-Government Services
JiaRui Zhang’s “An Application of Blockchain Technology in the Field of E-Government Services” (Ch. 2) proposes the implementation of an e-government services blockchain (EGSB), to provide “an integration of transaction validation, transaction consensus, block generation, block storage and blockchain temper proofing technology” albeit with a limited number of participants to provide various e-government services (Zhang, 2019, p. 23). The technologies have to be sufficiently dependable in terms of their roles in the provision of government services, such as in protection of data against tampering (which is not guaranteed in relational databases) and which then provides an opening for blockchain (Zhang, 2019). The negative headlines about attacks on various cryptocurrencies are seen to be weaknesses in the surrounding technologies based on “transaction platforms” (Zhang, 2019, p. 25).
The author defines e-government features as the following: permit applications; the provision of an examination and some certification; the provision of identity documentation (Zhang, 2019, p. 26). A blockchain may be used to “store block data onto the local node of the applicant, such as applying for services through mobile devices” or speeding up government work and others (Zhang, 2019, p. 26); e-government is not seen to need virtual currency (p. 26). Given the context, EGSB is designed to enable the following: “the diversification of transaction types, diversification of user types, diversification of storage patterns, diversification of storage content,…transaction verification, transaction consensus,” and other features (Zhang, 2019, p. 27). For all the mapping from needs to capabilities, how a system is implemented and actualized in the real will affect its efficacy. [Government has been shown to be a target of hostile state actors, so such systems have to be able to withstand cyberattacks at that level.] The author suggests that the E-Government Services Blockchain (EGSB) serves as a bridging program to collect the data of various interactions and to write a validated record of these, in a so-called “heterogeneous blockchain” (Zhang, 2019, p. 56).
Blockchains in the Cyber-Physical Confluence
One work focuses on the cyber-physical confluence, which is a concept instantiated in the Internet of Things (IoT) and smart technologies and sensor nets. Ben van Lier’s “Can the Cybersecurity of Smart Buildings be Improved Using Blockchain Technology” (Ch. 3) considers possible roles of blockchain in the cybersecurity of smart buildings. The author writes:
A smart building is a physical whole that functions based on interconnected and separately monitoring networked components. As a physical element in its environment, the building is, in its functioning, increasingly dependent on IT-based and networked intercommunicating and interacting systems that are driving the evolution from smart building to cyber-physical systems. Increasing integration and interdependency of the physical world and the cyber-environment is also leading to new and as yet unknown risks of intrusion in this new whole of a cyber-physical system by malicious elements from the smart building’s environment…Intercommunication and interaction between these systems makes it possible to have these systems jointly make consensus-based decisions on changes to the functioning of separate components or changes to the whole of a smart building…The capacity to jointly make decisions about changes to separate components or the whole of a smart building as a cyber-physical system is also referred to as the self-adaptive behaviour of the self-organising system as a whole. (van Lier, 2019, p. 74)
The idea of an adversarial attack on systems is part and parcel of the building of computational systems. The author observes: “When an outsider is able to hack into interconnected systems that jointly create a smart building, this could potentially lead to loss of control of the functioning of part of or the whole smart building” (van Lier, 2019, p. 59). The various systems in a smart building—including electrical systems, HVAC (heating, ventilation and air conditioning), security systems, and others—may be controlled in a centralized or decentralized way. Their smartness is not only about the adaptability of the various aspects but acquiring a sense of history and human preferences. As an attack surface, the networked cyber aspects of smart buildings have not been fully mapped. Where can adversaries acquire private information? Interrupt the functions of the system? Find weaknesses in single systems and in combined ones and in nexuses between the cyber and the physical?
A “Blockchain of Things” may be set up to “have interconnected systems that jointly make up a smart building autonomously, i.e., without the intervention of a third party, perform transactions that are intended to boost the security of the building, as well as its adaptability to the current status of the environment” (van Lier, 2019, p. 67). In other words, a smart building may be designed to be sufficiently “aware” in order to change settings to increase a building’s security. [One can imagine air sensors indicating poor air quality outside and applying air filtration or changing the percentage of outside vs. stored air, or some other adaptations.] Certainly, what a resilient and fault-tolerant distributed system should look like will depend on the particular technologies and contexts.
In terms of the “crosswalk mapping” of blockchain capabilities to various verticals, the most developed ones relate to real estate. Several works address the application of blockchain to real estate.
Blockchain-Linked Real Estate
Jan Veuger’s “Influence of Blockchain Applications and Digitalization on Real Estate” (Ch. 4) describes real estate as a field influenced by “surprising products and services, innovative business models, different market strategies, innovative ways of organizing and managing in the (real estate) market” (Veuger, 2019, p. 79). A relative wildcard factor that may introduce disruption to real estate (in the Netherlands and internationally) includes technologies, including blockchain as “a distributed database that contains a growing list of data items and that is hardened against manipulation and counterfeiting” (Veuger, 2019, p. 79). In a qualitative study, stakeholders in real estate were asked related questions about what they thought about blockchain’s likely effects on real estate, in the form of interviews, “exploratory conversations,” and correspondence (Veuger, 2019, p. 81). [In Steven Sinofsky’s four phases of disruption, which the author cites, the four steps include the following: disruption, evolution, convergence, and re-imagination (Sinofsky, 2014, as cited in Veuger, 2019, p. 82). This approach suggests that fields that work through the disruptions may end up in a space that is vastly different from its beginning state but which may also be more advanced, with actualized value propositions and new inventions and new entities in a competitive space.] Digital technologies enable “increasing transparency,” increased “efficiency” and “flexibility” and “new opportunities, new contents, and new insights” (Piazolo, 2018, as cited in Veuger, 2019, p. 90). A business model based on digital technologies include the following: “crowd investment, big data/smart data,” Building Information Modeling (BIM) / property management, “online brokerage, online market place, smart building, smart services,” and 3D printing (Piazolo, 2018, as cited in Veuger, 2019, p. 90). Into this mix comes blockchain.
Blockchain is anticipated to have effects on “efficiency, transparency, ownership, value (transfer), automation and service” in real estate (Veuger, 2019, pp. 91 - 92). The author elaborates:
With the help of Blockchain, we can bring together all information about buildings and give access to parties who need the information. It then works as a kind of building passport. Thus, a data room is created in which different information from buildings is stored. Any interested party can add information from, for example, tenants, valuations, history and maintenance plans. Banks can also check the financing more easily and monitor, for example, cash flow. According to Yermack (2017), professor and expert on Blockchain, the work now done by auditors will disappear. With the Building Information Model (BIM), data will also exchange information about design and materials use that can contribute to a circular economy. Demolition of a building and responsibilities for installation technology become more transparent and clearer with BIM. With a change of ownership, it is also very easy to change the complete building passport. Other examples of application areas include title registration, service costs, real estate as a service, building maintenance, settlement of various forms of taxation, real estate valuations such as the WOZ, and the refurbishment value for insurers and records of an Association of Owners). (Veuger, 2019, pp. 92 – 93)
Such endeavors will require the coordination with a wide range of entities to ensure that the blockchain records are accurate, that processes may be smoothed for all individuals, and other details. Much information will have to be digitized and made interoperable. The vision conveyed is that the Netherlands would be a “forerunner” in this process but that such endeavors can then be diffused into the world (Veuger, 2019, p. 95). The National Blockchain Coalition is also looking to advance uses of blockchain for digital identities, human capital applications, and other endeavors. The application of artificial intelligence (AI) to blockchain data may have implications on awareness and decision making but may have to be constrained by laws and policies to control against negative externalities.
Jo Bronckers and Jan Veuger’s “Blockchain: Technology Looking for a Problem in Real Estate?” (Ch. 5) suggests that the focus on blockchain in the real estate space in the Netherlands started back in 2016. And yet, the co-authors observe that the market is not flooded with blockchain products per se. They strove to answer two interrelated questions in their work: “How will blockchain change my business model? Where can I buy it so that I can employ it tomorrow?” (Bronckers & Veuger, 2019, p. 113) To enable more practical discussions of how this technology might be integrated, various organizations have brought together experts from multi-disciplinary fields to collaborate. In one sequence, a property goes on the market and attracts multiple investors, who pool funds for the purchase through an online app which serves as a go-between and manages the investment (Bronckers & Veuger, 2019, p. 122), with the respective investors owning digital shares of that property and benefitting from its rents. The app enables a crowd-sale to international investors. Each property has its own unique contract address (and token) on the blockchain.
In a sense, this work helps educate the general public about impending possibilities. This work offers a longer view, too. In their work, other questions arose: “Will the blockchain technology be a replace (sic) the existing land registry? Will the blockchain have effects on intermediaries like notaries or lawyers? Will smart-contracts and cryptocurrencies impact the industry? Will ICO’s (initial coin offerings) hit the industry?” (Bronckers & Veuger, 2019, p. 135)
Wendel Hulsebos and Jan Veuger’s “Start Up ‘GetaBrick’ in Real Estate” (Ch. 6) focuses on a new online platform in the real estate space called GetaBrick that lowers barriers to property investments and become “Brickstarters”; this app will enable them to decide on how the property evolves, such as “an investment in sustainability” (Hulsebos & Veuger, 2019, p. 147). Those in the commercial real estate space may have access to a larger pool of potential investors through this platform and lower-cost capital. (Hulsebos & Veuger, 2019, p. 147) The blockchain is thought to enable increased effectiveness and efficiencies of the necessary processes (Hulsebos & Veuger, 2019, p. 148). For Dutch investors, this opportunity is thought to increase their potential returns from invested funds since Dutch households apparently have “record amounts with regard to their savings deposits” (Hulsebos & Veuger, 2019, p. 148). In this model, the operating costs will be made transparent in part through the public blockchain, along with ownership and transactions and other features. “Smart transactions” may be programmed to execute when certain conditions are met, without need for third-party interventions (Hulsebos & Veuger, 2019, pp. 167 - 168). Yet, for all the sense of promise, they suggest caution in exploring blockchain for this space.
Michel Vonk’s “Blockchain: An Efficiency Solution for Housing Associations?” (Ch. 7) focuses on the potential applications of blockchain technologies for accurate record-keeping and memory. This chapter suggests that a proof-of-concept blockchain database may help mitigate “impediments and inefficiencies in activities that are sensitive to errors” due to their time-consuming and manual nature, such as checking the “personal information of the candidate and all the actions involved with signing a rental agreement” (Vonk, 2019, p. 179). This work focuses on social provision of housing for those with low incomes. Here, blockchain is considered for automation-based efficiencies to enhance the work of Dutch housing associations and their “220,000 new rental agreements” signed annually (Aedes, 2017) by enabling efficient information validation (Antonopoulos, 2014; Bharadwaj, 2016, as cited in Vonk, 2019, p. 180). Vonk offers UML diagrams showing where efficiencies may be achieved, with data from external parties used to validate tenant claims to speed up the process of their processing into housing and easeful and speedy processing of various fees. The idea of blockchain often involves cross-functional entities collaborating around shared processes for consumers.
Smart Energy Use, Sustainability, and Blockchain
Mieke Oostra and Jelle Rijpma’s “Blockchain Applications in Support of the Energy Transition” (Ch. 8) focuses on the forthcoming implementation of the Climate Agreement signed by the Dutch Council of Ministers in early 2018. This agreement will require implementation work by the government at the national, regional, and municipal levels. Blockchain is thought to enable the following endeavors, with implications for urban and regional planning work and construction work:
(1) on regional level – the coordination and approval of energy projects within a region or municipality, (2) on municipal level – the exchange of energy consumption and production between individual households and/or SME’s within a village or neighborhood, and (3) on building level – the planning and execution of retrofitting assignments (Oostra & Rijpma’s, 2019, pp. 209 - 210)
The researchers explore three case studies on each of the three scales (regional, municipal, and building) to describe how blockchain may be harnessed for energy transition. Technologies have a role to play to enable “sustainable economic growth; space for climate change and energy transition; strong, livable and climate-proof cities and regions including enough space for living, work and mobility; (and) future-proof development of the rural areas” (Oostra & Rijpma’s, 2019, p. 213).
In one example, “intelligent services” will enable “garbage chutes” able to separate recyclables and charge households based on their usage of this automated service; “hyperlocal weather sensors” communicate with sidewalks to let them know when to self-heat to melt snow as soon as it arrives; apps that notify people “when the chairs on the waterfront are available”; crowd-sourced block-party permits based on noise levels, and “traffic signals that auto-calibrate to ease pedestrian congestion during public events” (Oostra & Rijpma’s, 2019, p. 220). The data from the prior smart features would be captured centrally by the city and learned from for improved performance. The application (Sidewalk) would deploy location-aware features.
The last chapter, Esther L. Dekker’s “Many Keys of Blockchain for Real Estate” (Ch. 9), shows the complexity of real estate as a barrier to investing in it, particularly for international investors. In this work, the argument is that centralized departments enabling purchases are too powerful and corruptible:
With traditional financial and fiscal systems, centralisation plays a key role in the approval, administration and decision-making processes of property transactions. Each organization, region and country has distinct lending criteria, documentational requirements, administrational procedures and tax implications, to name but a few variables. Lending to foreigners or against foreign property is particularly difficult, and often impossible, due to this plethora of variances between centralised departments.Since these centralized departments hold all the power, they are open to corruption, misunderstanding, miscalculation and a great many other human faults. (Dekker, 2019, p. 248)
This argument moves on to the idea that technology can be a panacea for this “problem set” by enabling applications in “personal credit history, property history, smart contracts, voting, supply-chain management, property ownership, financial records” (Dekker, 2019, pp. 251 - 252). The exchanged value here is in theory backstopped by actual real estate, not just the reputation of the issuer of virtual value (as is done with cryptocurrencies). [It is hard to see how human faults may be less in distributed systems.] The idea is that distributed technologies may dissipate some of the centralized power and enable greater access for investors to buy into properties in the Netherlands and elsewhere. A global property registry could extend this capability globally if “mutually adopted across borders and languages” (Dekker, 2019, p. 252). Documents and processes would have to be standardized. Assets would have to be tokenized. Standing up such a system within a country is one thing, but going global will be that much more challenging, with potential for all sorts of shenanigans.
This edited collection does not have an epilogue or concluding chapter. This collection reads like a showcase of blockchain-based efforts in multiple countries, based on researchers who are collaborative systems thinkers. These works read as a byproduct of a conference and so are located around the Netherlands and particular market sectors, which reads a little like advertising. However, as with many academic collections, the contents are often limited by the social and physical geographies editor and social ties, the willingness of potential contributors to share work, the allure and knowledge of the topic, and other factors.
Figure 1. "Blockchain" (by Tumisu on Pixabay)
Conclusion
With any newish technology that is faddish and hyped, that is hawked as a panacea for various ills, as with blockchain, the risks of the dazzle come to the fore. One of the works suggests that technologies that enable a permanent record will somehow make the recorded thing permanent in the world, which it does not necessarily. The immutability of a blockchain, its permanence, is not magical, and invoking that permanence is a form of false reification. It is not as if current databases cannot be rendered immutable; they can be locked down and made “permanent.” It is not as if the aggregated features of blockchain cannot be created and configured in other ways. However, this is the technology of this hot moment in a confluence of media coverage, sales, and the public mind.
Jan Veuger’s Blockchain Technology and Applications (2019) helps start the conversation of using blockchain for other practical applications beyond the initial financial services one back in 2008. This work combines a mix of vision and how the technologies might be most effectively set up. While the vibe is that of a brainstorm and a technology looking for possible problems-to-solve, such work may lead to some fit solution-problem fit at some point.
Perhaps various industries are jumping on the bandwagon of “blockchain” because of its faddishness, and the benefit is marketing, the selling of trust, and not technology as the focal point. The onus is on those harnessing the technology to not only build public awareness but to earn public trust, with reliability, transparency, and performance.
About the Author
Shalin Hai-Jew works as an instructional designer at Kansas State University. Her email is shalin@ksu.edu.
Note: Thanks to Nova Science Publishing for providing a free review copy (watermarked .pdf file).
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